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Working Poor In All CT Towns Benefit From Tax Credit

by | Jan 10, 2013 12:30pm
() Comments | Commenting has expired
Posted to: The Economy, Equality, Town News, State Budget, Taxes

Some thought Gov. Dannel P. Malloy was crazy when he decided to dedicate $110 million of the state budget to a tax credit for the working poor, but a new report from Connecticut Voices for Children’s Fiscal Policy Center and the Connecticut Association for Human Services shows more than 180,000 households benefited.

Working families in every town in the state benefited from the credit and received an average of $601 back from the state after filing their tax return, according to the report. Households claiming the credit had average incomes of about $18,000 a year, which is what a single parent working full-time just above the minimum wage would earn before paying taxes.

Connecticut’s Earned Income Tax Credit is 30 percent of a filer’s federal tax credit and it was first adopted as part of the two-year budget in 2011.

The credit came in slightly under budget with $109.2 million being spent, but with the state facing a $2.3 billion deficit over the next two years everything will be on the table.

“We are concerned,” Wade Gibson, senior policy fellow at Connecticut Voices’ Fiscal Policy Center, said Thursday. However, “from our perspective we know the state is facing a sizable deficit and everything is on the table, and we just want to make sure folks look at other things before going to the EITC.”

He said every single dollar from the EITC goes right back into the economy.

These are families living paycheck-to-paycheck so the extra money goes to pay bills or buy groceries or clothing, Gibson said. In many instances, it’s used just to play “catch up.”

Sen. Majority Leader Martin Looney of New Haven, a proponent of the tax credit since 1999, has said it empowers urban families, but it is by no means an exclusively urban program.

“There are EITC recipients in just about every community in the state,” Looney said back in 2011.

Turns out he was right. According to the report released Thursday families in all 169 municipalities benefited from the credit.

In wealthier shorelines towns like Greenwich and Westbrook, 1,218 and 218 households benefited from the credit respectively.

It also gave a boost to residents in the state’s three largest cities. In New Haven 11,631 benefited. In Hartford, 16,121 benefited. And in Bridgeport, 15,703 benefited.

Click here for a town-by-town breakdown.

Gibson said the EITC makes Connecticut’s tax code less regressive and encouraged lawmakers to look elsewhere for budget cuts.

“Connecticut remains a state where folks in the bottom 20 percent pay 11 percent of their income in state and local taxes, while folks who make more than a million a year pay 5.5 percent of their income in state and local taxes,” Gibson said Thursday.

Opponents of the tax credit often argue the state is giving money away to households that don’t pay any state income taxes. But advocates of the tax credit say that’s a narrow way of looking at a tax system where some of the poorest residents pay more in sales, gas, and property taxes than the wealthiest residents.

“Connecticut has taken a giant step forward with the state’s EITC,” Jim Horan, executive director of the Connecticut Association of Human Services, said. “If we go backward, and take money out of the pockets of hardworking families, we are taking money away from the communities where they spend that money, and we are jeopardizing our fragile economic recovery.”

The report was released Thursday in anticipation of the start of the tax filing season.

Workers who earned $50,270 or less in 2012 and were raising children, and single workers without children who earned $13,980 or less, may qualify for the credit this year.

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Comments

(6) Archived Comments

posted by: ASTANVET | January 10, 2013  1:54pm

isn’t ‘tax credit’ another word for loophole?  Here i thought people wanted to close loopholes… silly me.  if lower taxes are good - why not just have low taxes.  Russia recently adopted a 13% flat tax and their economy has shifted to a serious upward trend.  I can’t believe that Russia has moved to more free market economy and we have moved to a more socialized economy… just…wow.

posted by: SLHamby | January 10, 2013  3:51pm

SLHamby

I think I got about $550 back. I found it very helpful.

posted by: Noteworthy | January 10, 2013  7:25pm

CT Voices for Children used to fight against tax credit programs. If you can’t beat them, join them.

Some notes on the most foolish statements in the above article:

1. There is ZERO economic impact from people using EITC to pay bills they have already incurred, especially rent, lights and gas.

2. Of course free money benefits a bunch of people. That’s kind of obvious. What EITC does is exempt the lower end working folks from paying anything to live in Connecticut - no sales tax, no gas tax, nothiing. Clue: Living here isn’t free - not by a long shot.

3. When state finances are so fragile; when the budget is unbalanced and we’re looking at billion dollar deficits each of the next two years plus the half a billion dollar deficit from this year - spending $110 million on new welfare is not very bright. In fact, it’s downright foolish.

4. Those who propose to keep doing the same thing should also propose where to get the money to fund it.

posted by: justsayin | January 10, 2013  10:01pm

The money others pay in gets sent to those who paid in less. That gets put back into the economy. Why not just let those who earn it keep or spend it? Oh I understand RE-distribution=Socialism=
Democratic votes.

posted by: 17beachboy | January 11, 2013  3:25pm

I question the logic behind the EITC. 

While I understand it is designed to give the so called “working poor” a helping hand, the more children you have, the larger your share of the EITC.  What ever happened to   not having children unless you could afford them?

I worked in a tax office for a while.  We would routinely receive telephone calls asking what the various EITC thresholds were - meaning, at what point does earning more money actually reduce the amount of the credit.  What many (not all) do is work/earn just enough to receive the maximum credit, then quit their job.

What CT should do is tie our EITC to the Department of Labor records.  Employers file quarterly returns for CT showing the name and social security number of each employee.  Once someone is no longer employed - if the reason is because they quit, they should be denied the CT EITC.  If they were laid off, then OK with them getting the credit.

This way they are required to keep working rather than quit to qualify for the credit.  Then the credit would actually be helping the working poor and not those out to beat the system.

posted by: Michael | January 12, 2013  1:44am

I think that Mr. Gibson serverely under estimates the state/local tax burden on the lower class. My West Haven property tax is 15% of my income, before I begin to figure state income, sales, gross receipts, gasoline, alcohol taxes, and fees.